How the World Struggles to Understand its Newest Economic Superpower

For foreign policy makers around the world, China has long been a complete enigma. For 20 years after the foundation of the People’s Republic of China (PRC) in 1949, the US had almost nothing to do with it, ignoring and embargoing it, placing sanctions on trade with it, and effectively only recognising the Republic of China on Taiwan issues. US President Nixon’s visit in 1972 ended that era, but while one large group of problems was jettisoned, another took its place. The PRC’s resumption of its seat on the UN in 1971 meant that it was able to assert its strategic needs much more forcefully. Amongst these were disputed border issues (both land and maritime) and a large number of unresolved political disputes with some of its neighbours, ranging from Japan over historic grievances about the bitter Sino Japanese War of 1937-1945, to India over its hosting of the exiled government of the Dalai Lama.

China’s embrace of economic reforms and the marketisation of its economy in the late 1970s should have ostensibly made things easier. But a new wave of issues has blossomed. After more than three decades of strong performance, with double-digit GDP growth rates for much of this period, the PRC presents policy makers in Europe, America, and most of the rest of the world with a powerful conundrum – how to embrace an entity that has opened its markets, developed its manufacturing base and is embracing global economic systems of governance, yet maintains a highly distinctive political order, one in which a Communist Party still holds a monopoly on power, and in which the rule of law and the scope of civil society is circumscribed by powerful political and administrative restrictions?

US and EU: Uneasy Partners

China’s relations with the US have become the perfect example of how things can go very right, and then very wrong. For most of the last three decades the two giants have veered between embracing and accepting (and sometimes even admiring) each other, to condemning, arguing and falling out. China’s bold era of liberalisation in the 1980s was celebrated by many in the US – leader Deng Xiaoping was even a `Time’ man of the year – but it ended abruptly with the Tiananmen Square events in June 1989. The US slapped embargoes on China and halted military dialogue, even though both sides pragmatically continued to talk to each other discreetly. Far from ushering in an era of cold relations between the two, China retook the initiative with even stronger economic reforms from 1992 onwards, culminating in entrance to the World Trade Organisation in 2001. Foreign investment flooded into the country, which opened many of its sectors to external trade and internationalised itself even more, not least helped by over a million Chinese students studying abroad.

Policy makers over this period must have held, particularly in the US and Europe, that the basis was being laid for a gradual conversion of China to a more biddable, compliant member of the global order. In many ways, they were right. China participated in many peacekeeping missions through the UN, worked with the US after 9-11 on counter-terrorism activities, and joined major configurations of powers through the IMF, World Bank, UN, and the various forms of G-groupings of countries. China spoke of itself as a peaceful, positive new power, one whose dramatic economic rise offered a ‘win win’ axis to the developing and developed world. The 2008 Beijing Olympics was placed in this narrative as the moment when China faced the world, its honour restored, its power clear, and its influence unapologetically presented.

An Assertive China

But things have not turned out as easy as that, and the same undercurrents of fractiousness and distrust remain – more sophisticated and perhaps more subliminal than they were in the 1980s or 1990s, but still more than able to cause contention and fallout. Since the 2008 Olympics, China has become the world’s second largest economy and its largest importer and exporter, but its political relationships have become more complicated. The puzzling reception of President Obama when he went to China in November 2009, with the heavy constraints placed upon him and the almost provocative management of his time and the news about it while in Beijing, was the first sign things were not going to become straightforward so quickly. Rows with the EU over the death sentence given to a British citizen later that year were compounded by the imprisonment, on Christmas Day 2009, of one of the country’s best known dissidents, Liu Xiaobo, despite international condemnation. Continuing spats with the US occurred in 2010 over Tibet, Taiwan, and the rate of the Chinese currency, and newly revived differences with Japan arose over the detention of a Chinese captain and his crew in October during an incident with a Japanese patrol ship.

The talk outside of China was about seeing a new assertiveness in how the country was behaving. But Western observers were finally finding evidence for what they had long been expecting: China, to the surprise of its own leaders as well as others, had developed economically far faster and more successfully than anyone had ever thought. Part of this was due to its own hard work, and part of it simply to the good fortune that had blown its way because of the folly or bad luck of some of the largest economies in the West. China’s economy, with its reliance on exports, its immense reserves of labour, and its flexibility, meant that it was in the right place at the right time to reap a massive dividend when those around it failed because of debt, structural weaknesses and bad management. At the very worst period of the global financial crisis in 2009 the country was still able to deliver 8% growth, while most other economies were contracting. The political outcome of this was that the PRC was immensely more influential and visible, whether it wanted this or not, by 2010. And with this came increased scrutiny and attention to its every action and move.

Making Sense of China’s International Role by Looking Within

Chinese leaders, whatever faction or direction they may come from, talk consistently about two things. One is their worries about how to guide China towards a stable, strong-performing, middle-income country. Their mantra about China still being a poor developing country on a per capita basis may well cause sighs of disbelief in the West, but for central policy makers in Beijing the huge pockets of poverty and discontent, particularly in the west of the country, and in the countryside, are of profound concern. Chinese leaders look at demographic problems – an ageing population, problems of resource security, food security, water supply, and massive challenges over setting up an adequate pension system – and then they look at the kinds of challenges to governance and political reform that they know are due to emerge as the Chinese economy continues to expand. No wonder they therefore wish to maintain their second important consistent point: that China is simply not ready to take up a major leadership position while these internal issues are still being resolved.

When the country’s leaders see an issue that clearly impacts on their national interest, i.e. about the security and stability of its borders, the securing of resources, and maintaining non-interference in its affairs by others, then China reacts just as it has since 1949 – with shrill certainty and consistency. Those that seek to interfere with it over Taiwan, Tibet, Xinjiang, and the maritime borders, things that it sees as directly linked to its national interests, inspire its strongest antagonism.

But on this second point, things are changing. As an example, over the NATO-led intervention in Libya in 2011, for instance, it counselled of restraint and the need to preserve peace and order to its other P5 members. But during the debate in the UN regarding the final vote it abstained rather than opposed, allowing the strikes to go ahead. Part of this may be due to the fact that China now has significant assets and interests in other countries . It had to repatriate over 35 thousand Chinese living and working in Libya before the NATO strikes. Sooner than it wanted, China has had to become not just a global economy, but a global power. This has put the old position of vigorously holding to the `non interference in the affairs of others’ under pressure. For contemporary China, there are few places where it does not have some interest or involvement, meaning that its `internal affairs’ and national interest are served by involvement in issues far beyond its borders.

Also a Problem for the West

China has also posed a problem to the West. On the one hand, after years of encouraging China to be a more integrated, co-operative member of the international community, it is now all of these things. China’s investments and its interests are spread throughout the world. It needs a stable international environment as much as the US or the EU. Never before has it been so easily influenced through its external interests. The policy of engagement pursued by the US and others over four decades, despite some tough moments, has resulted in a China that has never before been a more integrated member of the global community.

On the other hand, this very integration that permits others to seek influence there also means that China finds itself in the position of projecting its interests way beyond its borders. When China sees clear benefits and starts standing up for issues it perceives to be critical, the rest of the world usually goes into shock mode, with comments about the country now throwing its weight around, trying to impose its ideas on others, or seeking revenge for historic wrongs said to have been committed against it. In this second decade of the twenty-first century, the PRC is frequently damned if it asserts views on something, and damned if it doesn’t.

Years of being urged by the West to take a more pro-active stance on international issues are now being followed by an era in which every time China does move, its actions are regarded with suspicion and analysed minutely for evidence of its intent to dominate the rest of the world in the decades ahead.

It’s the Economy, Stupid… Or is it?

The Communist Party knew in 1978 that the old ideology centred on class struggle. Creating prosperity for as wide a group of people as possible, in order to bolster its legitimacy and maintain its grip on power, had to replace social conflict. Since then, therefore, economic development has been the key issue, with whatever was needed to achieve that, in terms of reshaping social policy or ideology, bought in. Three decades later, beyond the wildest dreams of the architects of the reform era, urban China has become rich – but plenty within the PRC wonder whether it is a happier country. Recent surveys veer between showing Chinese citizens to be wildly impressed and supportive of their government, to revealing that over 70 per cent are discontent, envious of the success of others around them, and dissatisfied.

The quality of the environment, the pressures of everyday life, corruption amongst leaders, and feeling of insecurity, all serve to bolster this sense of social discontent. ‘Unhappy China’,’ a blockbuster written by a group of popularists in 2009, just after the Olympics, captured this sense of public irritation at a self-serving elite which was expert at looking after its own interests, yet had let inequality get out of control and allowed China to become, in the words of one of the authors, ‘the sweatshop of the world’.

An unhappy China is a problem for itself, of course, but also for a world which must engage with it. Policy-makers promoting engagement from Nixon’s visit onwards may have had, in a corner of their minds, the fear that one day they may well get what they were wishing for. Economically, at least, that has come to pass. China contributes massively to global growth and is ruled by a government that has lifted more people out of poverty than any other in history. But this same China is riddled with the scars of recent historic trauma, be it the bitter memory of the millions of deaths from famine in the early 1960s, or the sufferings of a generation of students and intellectuals during the Cultural Revolution from 1966 onwards. Embedded in history is the nightmare of China’s humiliation and division in the 1930s, and its terrible suffering in the Wars of the 1940s. All these leave deep stains that politicians in the PRC steer well clear of, but which, in the words of one scholar, have left a ‘whispered history’ that erupts into public discourse from time to time, before being silenced again.

While its leaders, such as President Hu Jintao when visiting the US in early 2011, speak fluently of the need to improve human rights and the rule of law, this ‘Unhappy China’ has allowed rampant security services to unleash one of the most repressive clampdowns in living memory on some of its best known artists, intellectuals, bloggers and human rights lawyers. This discontent also adds particular bite to China’s accusations of the West’s hypocrisy: double standards over climate change, intervention in the Middle East and North Africa, and criticism of its recent perceived aggressiveness toward Japan, Korea and others.

Whether inside or outside China, we are all afflicted by a common problem, which is how to find an all-embracing and coherent narrative for what, exactly, this country is. Is it a poor, developing country still far from finding its own feet, or a power guided by a political philosophy largely alien to the rest of the world, quietly seeking dominance in order toredress a list of historic grievances? Is it a country finally coming to terms with a tragic past, whose re-emergence shows the victory of hope over defeat and despair? Or a place profoundly divided by social, ethnic and cultural divisions, far more unstable and precarious than the rest of the world thinks? Is it a nation that compensates for its own internal political weakness by barking harshly at outsiders and blaming them for its problems, or in fact a place where a whole new development model is being created that offers much needed alternatives to the jaded format used in the industrialised West? Should China inspire hope in us, and be encouraged to expand its global influence?

In the coming years, the questions about what China is and how to respond to it will neither decrease nor grow easier to answer. They will amplify. What answers do come will only arise through concerted efforts inside and outside China to create a narrative whose implications both China and the wider world can understand, together.